Running a Business - Introduction
From Entrepedia: The Entrepreneurship Wiki
Introduction by Harry Hellyer
Scottish Enterprise splits the core functions of a business down into: Finance, Sales and Marketing (often now just called Marketing) and Operations. At the other end of the spectrum, the 'Beer Mat Entrepreneur' adds a fourth 'cornerstone' giving a bit more definition by splitting Operations into: Designing and Making Products (often called Product or Product Development - and often then included under Marketing) and Day to Day Operations concerned with delivering them (Operations).
Contents |
Improving Your Venture
How do we make our business better? This question is the main issue around which this section of the Knowledge Bank is constructed.
There are hundreds of business books and articles offering advice around every aspect of starting, running, growing, and managing a business. The objective of this section is to provide an easy to use guide that gives grounded, easy to use information and advice that we can all use as entrepreneurs to understand aspects of our business better and so make it more successful - and where we are successful to add any information which we have, that we feel could help others.
As your business grows, you will need to begin to rethink your strategy, and allow it to evolve along with your changing needs. Your focus might change; you may become more interested in expanding and solidifying contacts and relationships and maximising growth within your existing customer base rather than working to attract new customers. Your existing relationships can offer a greater profit potential. You are also more assured of a reliable cashflow, whereas new customer and contact relationships may provide an increased turnover at the cost of lower profit margins and the possibility that they will not, in the end, be sustainable. [1]
However, Business Gateway advises entrepreneurs that "every business needs to be alert to new opportunities. There are obvious risks to relying solely on existing customers. Diversifying your customer base spreads those risks".[1]
When you are considering growing your venture, keep in mind that it is not always a good idea to stick to your old business model. This is the point at which you could start considering other ideas – outsourcing or franchising for example – which might offer more viable opportunities for growth.[1]
What Makes a Successful Venture?
Perhaps the best place to start in outlining how to make business better is by first outlining what business is about - what it is that any business actually does at its core. As seen in figure 1, Profit driven businesses, non profit: social businesses and lifestyle businesses; and other non profit organisations, all undertake the same core functions in order to provide a service. That is:
- They take resources supplied from somewhere.
- They do something to add value to them: to create a product or service.
- They provide the product or service to someone, or something
For example a furniture maker takes wood, glue, varnish, electricity, lathes, from a variety of suppliers, adds value by using these resources to create a chair - through their expertise and use of tools and other materials. And then either sells, gives or loans the furniture they make (the product), to someone else.
Or a hairdresser buys in equipment such as scissors and a chair at a salon, uses their experience and training to cut a persons hair (the service) which has been sold to someone who needs a hair cut. (The importance understanding the relationships between products, whole products and services for entrepreneurs is covered off in more detail in the Marketing section.
Fig 1: Core Activities of a Business
From now on we will assume that our business is one that is focused on making profits for the entrepreneur and any shareholders - but the principles apply equally as well for other types of business as listed above.
Key Relationships for a Venture
If we now expand our look at what the business does to include the main relationships the business must have in order to undertake its core activities we can see that three key sets of relationships occur for a business:
Fig 2: Key Relationships for a Business
To run a consistently successful business the team have to consistently achieve several goals:
First they have to understand the relationship of the business to the wider Business Environment (often referred to as the market) and then set overall business objectives and a successful strategy to ensure the business succeeds.
They have to find and manage suppliers for the things the business needs to add value
They have to organise the operations of the business including what products to produce and how to produce them.
They have to identify a market and potential customers and then sell to them.
And last but not least, they have to manage the finances and cash flows of the business in order to support it as it grows.
Further Information
- Garage Technology Ventures has compiled resources for growing ventures, including slides, video clips, and PDF files by Guy Kawasaki and based on his book The Art of the Start
